How to Start a Mushroom Farm
Mushroom farm businesses specialize in growing mushrooms. These mushrooms are used by customers for either medicinal or culinary purposes, depending on the type of mushroom grown. Additionally, they may be sold wholesale to clients or at retail prices.
Learn how to start your own Mushroom Farm and whether it is the right fit for you.
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Start a mushroom farm by following these 10 steps:
- Plan your Mushroom Farm
- Form your Mushroom Farm into a Legal Entity
- Register your Mushroom Farm for Taxes
- Open a Business Bank Account & Credit Card
- Set up Accounting for your Mushroom Farm
- Get the Necessary Permits & Licenses for your Mushroom Farm
- Get Mushroom Farm Insurance
- Define your Mushroom Farm Brand
- Create your Mushroom Farm Website
- Set up your Business Phone System
We have put together this simple guide to starting your mushroom farm. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
Exploring your options? Check out other small business ideas.
STEP 1: Plan your business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What will you name your business?
- What are the startup and ongoing costs?
- Who is your target market?
- How much can you charge customers?
Luckily we have done a lot of this research for you.
What will you name your business?
Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Mushroom Farm Name Generator
If you operate a sole proprietorship, you might want to operate under a business name other than your own name. Visit our DBA guide to learn more.
When registering a business name, we recommend researching your business name by checking:
- Your state's business records
- Federal and state trademark records
- Social media platforms
- Web domain availability.
It's very important to secure your domain name before someone else does.
What are the costs involved in opening a mushroom farm?
The startup expenses for a mushroom farm are minimal.
Business owners need a space for growing mushrooms. This doesn’t need to be a large space -- 500 square feet is big enough to grow 12,000 pounds of mushrooms a year, according to Profitable Plants. Business owners should be able to control the temperature, humidity, and light in the space, though.
Many business owners already have a space in their home that meets these requirements. Those that don’t might only have to purchase a space heater, humidifier, or dehumidifier.
The other main upfront costs are buying growing medium and spores, but these are both inexpensive. Straw, cardboard used coffee grounds and many other cheap materials can serve as growing mediums. Mushroom spores can be purchased for just a few dollars. Spore Trading Post sells 100 plugs of spores for $18.95.
What are the ongoing expenses for a mushroom farm?
The ongoing expenses for a mushroom farm business are minimal. They include new growing material, additional spores, and utility costs.
Who is the target market?
A mushroom farm business’ ideal customer is a restaurant that focuses on using locally sourced ingredients. A restaurant will have regular orders that provide stable income. A restaurant that focuses on serving locally sourced foods will be less likely to purchase their mushrooms from a large supplier that’s in another state.
How does a mushroom farm make money?
A mushroom farm makes money by selling harvested mushrooms. Mushrooms might be sold by the pint, quart, or pound.
How much can you charge customers?
Specialty mushrooms typically retail for $16 per pound. Oyster mushrooms wholesale for between $6 and $8 per pound, and other types of specialty mushrooms have similar wholesale prices.
Because most people don’t want to spend $16 on mushrooms, retail sales are usually done by the pint or quarter-pound. Wholesale transactions normally are by the pound.
How much profit can a mushroom farm make?
A mushroom farm business that grows 12,000 pounds of mushrooms and only sells to wholesale clients could make between $72,000 and $96,000 annually. Selling retail in addition to wholesale would significantly increase the business’ revenue. Since the ongoing expenses are minimal, most of this revenue would be profit.
How can you make your business more profitable?
Many mushroom farm businesses add a revenue stream by assembling grow-your-own mushroom kits. These may be in cardboard boxes, logs or some other medium. Offering classes on growing or using mushrooms is another way to increase revenue and profits.
STEP 2: Form a legal entity
The most common business structure types are the sole proprietorship, partnership, limited liability company (LLC), and corporation.
Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your mushroom farm is sued.
Form Your LLC
Read our Guide to Form Your Own LLC
You can form an LLC yourself and pay only the minimal state LLC costs or hire one of the Best LLC Services for a small, additional fee.
Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN through the IRS website. If you would like to learn more about EINs, read our article, What is an EIN?
There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
Besides being a requirement when applying for business loans, opening a business bank account:
- Separates your personal assets from your company's assets, which is necessary for personal asset protection.
- Makes accounting and tax filing easier.
Recommended: Read our Best Banks for Small Business review to find the best national bank or credit union.
Get a business credit card
Getting a business credit card helps you:
- Separate personal and business expenses by putting your business' expenses all in one place.
- Build your company's credit history, which can be useful to raise money later on.
Recommended: Apply for an easy approval business credit card from Divvy and build your business credit quickly.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
Make LLC accounting easy with our LLC Expenses Cheat Sheet.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a mushroom farm. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
In business where services are provided on an extended basis, a services contract is often put in place outlining terms and conditions of service.
Mushroom farming businesses should require clients to sign a services agreement before starting a new project. This agreement should clarify client expectations and minimize risk of legal disputes by setting out payment terms and conditions, and service level expectations. An example of a service contract can be found here.
Labor safety requirements
It is important to comply with all Occupational Safety and Health Administration requirements.
Relevant requirements include:
- Employee injury report
- Safety signage
STEP 7: Get business insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
FInd out what types of insurance your Mushroom Farm needs and how much it will cost you by reading our guide Business Insurance for Mushroom Farm.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
Recommended: Get a logo using Truic's free logo Generator no email or sign up required, or use a Premium Logo Maker.
If you already have a logo, you can also add it to a QR code with our Free QR Code Generator. Choose from 13 QR code types to create a code for your business cards and publications, or to help spread awareness for your new website.
How to promote & market a mushroom farm
One of the most effective ways to promote a mushroom farm business is through in-person interactions. Talking to potential customers, whether they’re consumers, grocery store owners, or chefs, is the best way for business owners to educate customers and share their passion for mushrooms. Business owners can create opportunities to connect with potential customers by selling mushrooms at farmers’ markets and making sales calls to businesses.
How to keep customers coming back
Mushroom farm businesses can keep customers coming back for more mushrooms by helping them discover more ways to use mushrooms. This may include sharing recipes or introducing mushrooms as a healthy snack. The more customers use mushrooms, the more frequently they’ll need to purchase the fungi.
STEP 9: Create your business website
After defining your brand and creating your logo the next step is to create a website for your business.
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
- All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
- Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
Recommended: Get started today using our recommended website builder or check out our review of the Best Website Builders.
Other popular website builders are: WordPress, WIX, Weebly, Squarespace, and Shopify.
STEP 10: Set up your business phone system
Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use. Check out our review of the Best Business Phone Systems 2023 to find the best phone service for your small business.
Recommended Business Phone Service: Phone.com
Phone.com is our top choice for small business phone numbers because of all the features it offers for small businesses and it's fair pricing.
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Is this Business Right For You?
Anyone who enjoys working with their hands and interacting with people may be well-suited for running a mushroom farm business. Growing mushrooms is a hands-on task, and having an ability to connect with people can help business owners share their product with potential customers.
A mushroom farm can be started as a part-time business while working another job. Mushrooms require a little attention each day, but they aren’t too demanding, and they can be tended to at any time of the day or night. It’s easy to fit growing mushrooms around other obligations.
Want to know if you are cut out to be an entrepreneur?
Take our Entrepreneurship Quiz to find out!
What happens during a typical day at a mushroom farm?
The process of actually growing mushrooms involves three steps:
- preparing growing medium, which takes a few hours and should be done once per week
- misting growing mushrooms, which takes a few minutes and must be done daily
- harvesting mature mushrooms, which takes a few minutes and should be done every day or two
In addition to these tasks, mushroom farm business owners also must find customers, package harvested mushrooms, and deliver mushrooms.
What are some skills and experiences that will help you build a successful mushroom farm?
In order to run a mushroom farm, business owners must know how to grow mushrooms. Many companies offer courses and seminars on growing these fungi. For instance, Fungi for the People offers a week-long course every few months, and Radical Mycology has courses in many different states. Additionally, both Mushroom Mountain and The Mushroom Growers’ Newsletter maintain lists of upcoming conferences and educational events.
Business owners may also want to consult the American Mushroom Institute or the North American Mycological Association. Both organizations have lists of online materials that cover mycology.
Finally, many books about growing mushrooms and starting a mushroom business are available. A few titles include Organic Mushroom Farming and Mycoremediation, Growing Mushrooms for Profit and Starting a Mushroom Growing Business on a Shoestring. Some of these books provide valuable insights into growing mushrooms commercially, while others are helpful resources that can be consulted after a class is over.
What is the growth potential for a mushroom farm?
A mushroom farm business may be a small, one-person operation, or it might grow into a large company that has multiple locations. Detroit Mushroom Factory, which is run by just two people, is an example of a small mushroom farm. Ostrom’s is a much larger company that has customers located throughout the Northwest United States.
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Learn from other business owners
Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a mushroom farm?
While mushrooms are generally easy to grow, some types are easier to grow than others. Heather of Mommypotamus recommends starting with oyster mushrooms, which are the easiest to grow, and then progressing to shiitake mushrooms, which are the next-easiest. From this point, business owners can slowly progress into more challenging kinds.
How and when to build a team
Many mushroom farm businesses are run by just one or two people. Mushroom farms that hire employees usually don’t do so until their revenue supports an employee’s salary.
- The American Mushroom Institute Can Help You With Your Mushroom Farm
- Resources for Farmers from the North American Mycological Association